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Haha! You beat me to it.I was about to post the same story.
Mark-to-market tweak 'may be' in Obama plan-Dodd
Wed, Feb 11 2009, 00:35 GMT
http://www.afxnews.com
WASHINGTON, Feb 10 (Reuters) - The chairman of the U.S. Senate Banking Committee said on Tuesday that adjusting mark-to-market accounting rules eventually "may be" part of the Obama administration's plan to stabilize financial markets.
Sen. Christopher Dodd told reporters after a hearing: "You ought to be able to come up with some creative idea that doesn't retreat from mark-to-market but would allow some response when you have a pro-cyclical environment."
Asked why no such idea came up at the hearing on the administration's plan and why no accounting rules adjustment was included in the plan, Dodd said: "It may be. It may be."
Dodd, a Democrat from Connecticut, said last week that it might be possible to modify mark-to-market accounting rules for U.S. banks facing steep writedowns of troubled assets without abandoning the underlying accounting standard.
The issue of how to value distressed assets held by U.S. banks has been one of the most difficult challenges in constructing a bank rescue plan.
When Treasury Secretary Timothy Geithner unveiled the administration's plan at a Tuesday news conference, he was introduced by Dodd.
Mark-to-market tweak 'may be' in Obama plan-Dodd
Wed, Feb 11 2009, 00:35 GMT
http://www.afxnews.com
WASHINGTON, Feb 10 (Reuters) - The chairman of the U.S. Senate Banking Committee said on Tuesday that adjusting mark-to-market accounting rules eventually "may be" part of the Obama administration's plan to stabilize financial markets.
Sen. Christopher Dodd told reporters after a hearing: "You ought to be able to come up with some creative idea that doesn't retreat from mark-to-market but would allow some response when you have a pro-cyclical environment."
Asked why no such idea came up at the hearing on the administration's plan and why no accounting rules adjustment was included in the plan, Dodd said: "It may be. It may be."
Dodd, a Democrat from Connecticut, said last week that it might be possible to modify mark-to-market accounting rules for U.S. banks facing steep writedowns of troubled assets without abandoning the underlying accounting standard.
The issue of how to value distressed assets held by U.S. banks has been one of the most difficult challenges in constructing a bank rescue plan.
When Treasury Secretary Timothy Geithner unveiled the administration's plan at a Tuesday news conference, he was introduced by Dodd.
There are rumors that Senator Dodd said they are proposing a suspension of Mark to Market... Anyone hear this? Apparently this is why the after hour numbers look so good. Anyone got any leads on this?
There are rumors spreading on other forums that Mark to Market will be suspended and that's why after hour stock prices are shooting up. Anyone hear anything about this???
I don't get it. It's way up A/H!?
I don't get it. Its way up AH!
HEB-- Upcoming FDA Approval
Up 10% even in this market today-- trading at .64 and likely headed to $1+ before FDA announcement, scheduled for 2/25/09.
HEB-- Upcoming FDA Approval
Up 10% even in this market today-- trading at .64 and likely headed to $1+ before FDA announcement, scheduled for 2/25/09.
HEB-- Upcoming FDA Approval
Up 10% even in this market today-- trading at .64 and likely headed to $1+ before FDA announcement, scheduled for 2/25/09.
Jump on!
We are up against resistance @ 4.20
It is very important that we break that this morning or we will be left behind by BAC and others.
Already in pre-market we have hit it once, but bounced back down.
Gotta punch thru then LOOK OUT ABOVE!
We may have to wait until the Geithner news to see wherr the price action is truly moving, looks like.
New chart to watch closely today for BAC
If we break this key resistance (which we couldn't yesterday), then next stop... $11+ !
Chart:
http://finviz.com/quote.ashx?t=bac
U.S. to lay out plan to sop up bad mortgage assets
WASHINGTON (Reuters) - U.S. Treasury Secretary Timothy Geithner will lay out a rescue plan on Tuesday that will rely on public and private funds to take $500 billion of bad assets off banks' books, sources said.
The plan would also extend a Federal Reserve program aimed at shoring up consumer lending to the troubled mortgage sector, allowing the U.S. central bank to extend up to $1 trillion in loans to holders of a wide variety of asset-backed securities, according to sources.
Details on Geithner's proposal for stabilizing a U.S. financial sector undermined by soaring losses on mortgage-related debts emerged following briefings Treasury officials provided for Capitol Hill lawmakers.
President Barack Obama told a news conference on Monday that cleaning up banks' balance sheets was a priority and didn't rule out the possibility that it will take more money than the $700 billion Congress already has approved to complete the job.
"We don't know yet whether we're going to need additional money or how much additional money we'll need until we see how successful we are at restoring a level of confidence in the marketplace," Obama said.
Clearly aware that shaky global financial markets are intently watching what steps Washington will take to right the world's largest economy, Obama called on Congress to speedily approve an economic stimulus package to complement the revamped bank-rescue proposals that Geithner was to unveil.
"If you delay acting on an economy of this severity, then you potentially create a negative spiral that becomes much more difficult for us to get out of," Obama said. "This is not your ordinary, run-of-the-mill recession, we are going through the worst economic crisis since the Great Depression."
Geithner will outline the Obama administration's plan to revamp a U.S. financial bailout program that his predecessor, Hank Paulson, persuaded Congress to approve last year. About half of that money has been committed to pump capital into banks and ailing U.S. automakers.
Before taking over Treasury, Geithner was president of the New York Federal Reserve Bank and worked closely with Paulson on the prior administration's rescue effort but acknowledged it was inadequate and unpopular.
"The spectacle of huge amounts of taxpayer money being provided to the same institutions that helped cause the crisis, with limited transparency and oversight, added to public distrust," Geithner said in remarks prepared for delivery when the new measures are released.
He pledged banks will go through "a carefully designed comprehensive stress test" in future to make sure their balance sheets are clean and they meet requirements for capital.
Banks will continue to receive capital injections but they will have to meet tough new rules that require them to disclose how the money they receive is leading to more lending.
Geithner will also expand a joint Treasury-Fed program currently aimed at stimulating consumer and small business loans by allowing use of mortgage-backed securities and private label mortgage securities as collateral, sources said.
The program currently allows the Fed to lend up to $200 billion dollars to holders of top-rated securities backed by credit car, education, auto and small business loans. That program would be expanded to $1 trillion, sources familiar with the plan said.
Treasury also is expected to announce $50 billion aimed at stemming home foreclosures, several sources said. On Monday the director of the White House National Economic Council, Lawrence Summers, said on CNN more measures to help the battered housing sector will be coming within about two weeks.
Continued...
http://www.reuters.com/article/newsOne/idUSTRE5160AM20090210
U.S. to lay out plan to sop up bad mortgage assets
WASHINGTON (Reuters) - U.S. Treasury Secretary Timothy Geithner will lay out a rescue plan on Tuesday that will rely on public and private funds to take $500 billion of bad assets off banks' books, sources said.
The plan would also extend a Federal Reserve program aimed at shoring up consumer lending to the troubled mortgage sector, allowing the U.S. central bank to extend up to $1 trillion in loans to holders of a wide variety of asset-backed securities, according to sources.
Details on Geithner's proposal for stabilizing a U.S. financial sector undermined by soaring losses on mortgage-related debts emerged following briefings Treasury officials provided for Capitol Hill lawmakers.
President Barack Obama told a news conference on Monday that cleaning up banks' balance sheets was a priority and didn't rule out the possibility that it will take more money than the $700 billion Congress already has approved to complete the job.
"We don't know yet whether we're going to need additional money or how much additional money we'll need until we see how successful we are at restoring a level of confidence in the marketplace," Obama said.
Clearly aware that shaky global financial markets are intently watching what steps Washington will take to right the world's largest economy, Obama called on Congress to speedily approve an economic stimulus package to complement the revamped bank-rescue proposals that Geithner was to unveil.
"If you delay acting on an economy of this severity, then you potentially create a negative spiral that becomes much more difficult for us to get out of," Obama said. "This is not your ordinary, run-of-the-mill recession, we are going through the worst economic crisis since the Great Depression."
Geithner will outline the Obama administration's plan to revamp a U.S. financial bailout program that his predecessor, Hank Paulson, persuaded Congress to approve last year. About half of that money has been committed to pump capital into banks and ailing U.S. automakers.
Before taking over Treasury, Geithner was president of the New York Federal Reserve Bank and worked closely with Paulson on the prior administration's rescue effort but acknowledged it was inadequate and unpopular.
"The spectacle of huge amounts of taxpayer money being provided to the same institutions that helped cause the crisis, with limited transparency and oversight, added to public distrust," Geithner said in remarks prepared for delivery when the new measures are released.
He pledged banks will go through "a carefully designed comprehensive stress test" in future to make sure their balance sheets are clean and they meet requirements for capital.
Banks will continue to receive capital injections but they will have to meet tough new rules that require them to disclose how the money they receive is leading to more lending.
Geithner will also expand a joint Treasury-Fed program currently aimed at stimulating consumer and small business loans by allowing use of mortgage-backed securities and private label mortgage securities as collateral, sources said.
The program currently allows the Fed to lend up to $200 billion dollars to holders of top-rated securities backed by credit car, education, auto and small business loans. That program would be expanded to $1 trillion, sources familiar with the plan said.
Treasury also is expected to announce $50 billion aimed at stemming home foreclosures, several sources said. On Monday the director of the White House National Economic Council, Lawrence Summers, said on CNN more measures to help the battered housing sector will be coming within about two weeks.
Continued...
http://www.reuters.com/article/newsOne/idUSTRE5160AM20090210
Private capital may not be on board for bank bailout
NEW YORK (Reuters) - The U.S. government may find buyout firms, hedge funds and other private investors reluctant to help it cleanse banks of toxic assets, hampering efforts to jumpstart the economy.
Private investors say they are waiting for the details of an Obama administration plan, to be unveiled on Tuesday, that is expected to include buying troubled assets from banks. But they worry about how the assets would be priced and what guarantees they would get against potential losses.
A further concern for investors is likely to be the government's track record on how it handled the first round of the $700 billion rescue for the industry, when it imposed restrictions on such things as dividends and compensation on banks that received taxpayer money.
"The aggregator bank is the right idea," said Whitney Tilson, founder of hedge fund T2 Partners LLC, referring to the plan to create a so-called 'bad bank' as a way to take toxic assets off the books. Even so, "the question is how do the assets get into the aggregator bank and right now investors are wondering is this (plan) going to be the same."
To lure in private investors, the bad bank could be allowed to issue debt backed by the Federal Deposit Insurance Corp, a source familiar with the Obama administration's thinking told Reuters.
Overall estimates of the amount of assets a bad bank would have to buy have run to more than a trillion dollars and the government is counting on private capital to help revive the economy from its deepest slump in decades.
Treasury Secretary Timothy Geithner is looking for ways to use taxpayer funds to attract private investors, White House National Economic Council Director Lawrence Summers told Fox News television on Sunday. But private capital could come at a cost to taxpayers.
"With the model under discussion now, the government is taking all of the downside beyond the initial payment that private investors made, while the investors get all of the upside," said Dan Alpert, managing director and investment banker at boutique bank Westwood Capital.
PRICE IS RIGHT?
Banks want the government to buy distressed assets, but the administration has struggled with pricing the assets in a way that helps the banks while being fair to taxpayers.
"If the prices are deemed too high, then the private sector will not bid aggressively for the assets and will show only a modest interest -- in essence to wave the flag," said Tom Sowanick, chief investment officer for $22 billion in assets at Clearbrook Financial LLC.
The government could sweeten the deal by providing guarantees that protect investors from losses and help in determining the price of those assets. But if guarantees are set too high, taxpayers could lose out and if they are too low, investors might not bite.
"It's such a black hole right now. Nobody knows how to price these toxic assets," said Paul Homsy, a principal at Crescent Asset Management. "If they put a floor on these assets, it might be something attractive."
The government may also have to consider further incentives such as providing financing when private firms cannot easily get debt elsewhere.
In July, Merrill Lynch agreed to sell $30.6 billion of collateralized debt obligations to buyout firm Lone Star for $6.7 billion, or about 22 cents on the dollar. But the investment bank, which is now part of Bank of America Corp (BAC.N), also agreed to finance about 75 percent of the purchase price. Continued...
http://www.reuters.com/article/companyNews/idUKTRE51880720090210?symbol=8648.T
Private capital may not be on board for bank bailout
NEW YORK (Reuters) - The U.S. government may find buyout firms, hedge funds and other private investors reluctant to help it cleanse banks of toxic assets, hampering efforts to jumpstart the economy.
Private investors say they are waiting for the details of an Obama administration plan, to be unveiled on Tuesday, that is expected to include buying troubled assets from banks. But they worry about how the assets would be priced and what guarantees they would get against potential losses.
A further concern for investors is likely to be the government's track record on how it handled the first round of the $700 billion rescue for the industry, when it imposed restrictions on such things as dividends and compensation on banks that received taxpayer money.
"The aggregator bank is the right idea," said Whitney Tilson, founder of hedge fund T2 Partners LLC, referring to the plan to create a so-called 'bad bank' as a way to take toxic assets off the books. Even so, "the question is how do the assets get into the aggregator bank and right now investors are wondering is this (plan) going to be the same."
To lure in private investors, the bad bank could be allowed to issue debt backed by the Federal Deposit Insurance Corp, a source familiar with the Obama administration's thinking told Reuters.
Overall estimates of the amount of assets a bad bank would have to buy have run to more than a trillion dollars and the government is counting on private capital to help revive the economy from its deepest slump in decades.
Treasury Secretary Timothy Geithner is looking for ways to use taxpayer funds to attract private investors, White House National Economic Council Director Lawrence Summers told Fox News television on Sunday. But private capital could come at a cost to taxpayers.
"With the model under discussion now, the government is taking all of the downside beyond the initial payment that private investors made, while the investors get all of the upside," said Dan Alpert, managing director and investment banker at boutique bank Westwood Capital.
PRICE IS RIGHT?
Banks want the government to buy distressed assets, but the administration has struggled with pricing the assets in a way that helps the banks while being fair to taxpayers.
"If the prices are deemed too high, then the private sector will not bid aggressively for the assets and will show only a modest interest -- in essence to wave the flag," said Tom Sowanick, chief investment officer for $22 billion in assets at Clearbrook Financial LLC.
The government could sweeten the deal by providing guarantees that protect investors from losses and help in determining the price of those assets. But if guarantees are set too high, taxpayers could lose out and if they are too low, investors might not bite.
"It's such a black hole right now. Nobody knows how to price these toxic assets," said Paul Homsy, a principal at Crescent Asset Management. "If they put a floor on these assets, it might be something attractive."
The government may also have to consider further incentives such as providing financing when private firms cannot easily get debt elsewhere.
In July, Merrill Lynch agreed to sell $30.6 billion of collateralized debt obligations to buyout firm Lone Star for $6.7 billion, or about 22 cents on the dollar. But the investment bank, which is now part of Bank of America Corp (BAC.N), also agreed to finance about 75 percent of the purchase price. Continued...
http://www.reuters.com/article/companyNews/idUKTRE51880720090210?symbol=8648.T
Private capital may not be on board for bank bailout
NEW YORK (Reuters) - The U.S. government may find buyout firms, hedge funds and other private investors reluctant to help it cleanse banks of toxic assets, hampering efforts to jumpstart the economy.
Private investors say they are waiting for the details of an Obama administration plan, to be unveiled on Tuesday, that is expected to include buying troubled assets from banks. But they worry about how the assets would be priced and what guarantees they would get against potential losses.
A further concern for investors is likely to be the government's track record on how it handled the first round of the $700 billion rescue for the industry, when it imposed restrictions on such things as dividends and compensation on banks that received taxpayer money.
"The aggregator bank is the right idea," said Whitney Tilson, founder of hedge fund T2 Partners LLC, referring to the plan to create a so-called 'bad bank' as a way to take toxic assets off the books. Even so, "the question is how do the assets get into the aggregator bank and right now investors are wondering is this (plan) going to be the same."
To lure in private investors, the bad bank could be allowed to issue debt backed by the Federal Deposit Insurance Corp, a source familiar with the Obama administration's thinking told Reuters.
Overall estimates of the amount of assets a bad bank would have to buy have run to more than a trillion dollars and the government is counting on private capital to help revive the economy from its deepest slump in decades.
Treasury Secretary Timothy Geithner is looking for ways to use taxpayer funds to attract private investors, White House National Economic Council Director Lawrence Summers told Fox News television on Sunday. But private capital could come at a cost to taxpayers.
"With the model under discussion now, the government is taking all of the downside beyond the initial payment that private investors made, while the investors get all of the upside," said Dan Alpert, managing director and investment banker at boutique bank Westwood Capital.
PRICE IS RIGHT?
Banks want the government to buy distressed assets, but the administration has struggled with pricing the assets in a way that helps the banks while being fair to taxpayers.
"If the prices are deemed too high, then the private sector will not bid aggressively for the assets and will show only a modest interest -- in essence to wave the flag," said Tom Sowanick, chief investment officer for $22 billion in assets at Clearbrook Financial LLC.
The government could sweeten the deal by providing guarantees that protect investors from losses and help in determining the price of those assets. But if guarantees are set too high, taxpayers could lose out and if they are too low, investors might not bite.
"It's such a black hole right now. Nobody knows how to price these toxic assets," said Paul Homsy, a principal at Crescent Asset Management. "If they put a floor on these assets, it might be something attractive."
The government may also have to consider further incentives such as providing financing when private firms cannot easily get debt elsewhere.
In July, Merrill Lynch agreed to sell $30.6 billion of collateralized debt obligations to buyout firm Lone Star for $6.7 billion, or about 22 cents on the dollar. But the investment bank, which is now part of Bank of America Corp (BAC.N), also agreed to finance about 75 percent of the purchase price. Continued...
http://www.reuters.com/article/companyNews/idUKTRE51880720090210?symbol=8648.T
PPS going down today?
From a discussion about the viability of GM's hydrogen fuel cell vehicle technology- where some were saying it is not the future of cars...
--------------------------------------------
Sounds like you may not have read a lot about the latest on hydrogen fuel cell technology... As far as distribution system.. both Toyota and GM attempted to meet and cut a deal with oil companies like exxon, mobil, etc.. about placing "hydrogen pumps" at existing gas stations and guess what, all but one (I believe it was Texaco) refused to even meet. Surprise, surprise.
Private sector can step in, IMHO, and make lots of $$ here-- should the technology continue to move forward.
Look at this: http://www.hgasstations.com/
Then of course, there is the recent discovery by a couple of scientists who used microwave technology to quickly and efficiently seperate H2O. They are meeting with the US energy dept to discuss their findings-- at the request of the GOVT.
Other links:
http://blog.wired.com/cars/2008/03/we-drive-the-ch.html
Even Honda got into the game:
http://blog.wired.com/cars/2008/11/hondas-still-pi.html
Sounds like you may not have read a lot about the latest on hydrogen fuel cell technology... As far as distribution system.. both Toyota and GM attempted to meet and cut a deal with oil companies like exxon, mobil, etc.. about placing "hydrogen pumps" at existing gas stations and guess what, all but one (I believe it was Texaco) refused to even meet. Surprise, surprise.
Private sector can step in, IMHO, and make lots of $$ here-- should the technology continue to move forward.
Look at this: http://www.hgasstations.com/
Then of course, there is the recent discovery by a couple of scientists who used microwave technology to quickly and efficiently seperate H2O. They are meeting with the US energy dept to discuss their findings-- at the request of the GOVT.
Other links:
http://blog.wired.com/cars/2008/03/we-drive-the-ch.html
Even Honda got into the game:
http://blog.wired.com/cars/2008/11/hondas-still-pi.html
RE:"Biosimilar is going to become a much bigger part of medical and FDA lingo going forward. $50,000 a month cancer treatments are going to have competition."
agreed.. Especially if you start considering that the government may nationalize and pay for more healthcare than ever before.
"cars of the future" are the Hydrogen powered ones, IMHO. I don't see any plans for those eventhough Toyota and GM have been talking about them for 3 years.
Go figure.. And Ford was DOWN? WTF?
'Bad Bank' Is Dropped From Financial-Rescue Package
The Obama administration's wide-ranging plan to stabilize the financial system no longer includes creating a "bad bank" but will still contain measures to encourage private firms to buy up toxic assets from financial institutions, according to a source familiar with the plan.
In addition, funding for the bank-rescue plan is unlikely to exceed the $350 billion currently available under the TARP, this source said.
"They have to have enough to calm the markets, but there might not be as many details as previously thought," he said.
A Treasury Department source said the plan was essentially complete with only minor "tweaks" being applied. The package will be unveiled Tuesday by Treasury Secretary Timothy Geithner at 11 am EST. CNBC.com will carry the speech live.
More: http://www.cnbc.com//id/29104178?__source=yahoo|headline|quote|text|&par=yahoo
The PPS has been ticking up since testing a "double bottom" earlier. Even when the DOW was red, this little guy was pushing up. Is that a good sign?
Any guesses?
On today's close price?
Very true!
Bad news for GM
May be forced into Bankruptcy
http://www.bloomberg.com/apps/news?pid=20601087&sid=atjQ8fjgT.kY&refer=home
Bad news for GM
May be forced into Bankruptcy
http://www.bloomberg.com/apps/news?pid=20601087&sid=atjQ8fjgT.kY&refer=home
I agree, but remember... They all share vendors. this could be disasterous.
GM, Chrysler May Be Put Into Bankruptcy to Protect U.S. Loans
Feb. 9 (Bloomberg) -- General Motors Corp. and Chrysler LLC may have to be forced into bankruptcy by the U.S. government to assure repayment of $17.4 billion in federal bailout loans, a course of action the automakers claim would destroy them.
U.S. taxpayers currently take a backseat to prior creditors, including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to loan agreements posted on the U.S. Treasury's Web site. The government has hired a law firm to help establish its place at the front of the line for repayment, two people involved in the work said last week.
If federal officials fail to get a consensual agreement to change their place in line for repayment, they have the option to force the companies into bankruptcy as a condition of more bailout aid. The government would finance the bankruptcy with a so-called "debtor in possession" or DIP loan, a lender status that gives the U.S. priority over other creditors, said Don Workman, a partner at Baker & Hostetler LLP.
"They are negotiating to see if they can reach an agreement," said Workman, a bankruptcy lawyer based in Washington. "If not, they are saying ‘We are pretty darn sure that a bankruptcy judge will allow us'" to be first in line for repayment.
Both automakers have dismissed calls to reorganize under bankruptcy protection, saying a Chapter 11 restructuring would scare away buyers and lead to liquidation. GM and Chrysler are working toward a Feb. 17 deadline to show progress on a plan put in place as part of the U.S. loans received in December from the Troubled Asset Relief Program. They must reduce labor costs and show how they will repay the money by next month.
Out of Court
GM and Chrysler are already trying to restructure out of court, cutting labor costs, reducing debt levels and eliminating dealers. GM is in talks to pare $27.5 billion in unsecured debt to about $9.2 billion in a swap for equity.
The company said it plans to shut dealers and reduce obligations to a union retiree health fund by half to $10.2 billion in a separate equity swap. Chrysler Chief Executive Officer Robert Nardelli has said his company will also try to cut debt levels.
January sales from automakers plunged 55 percent at Chrysler, 49 percent at GM and 40 percent at Ford Motor Co.
Ford, the second-largest U.S. carmaker, has declined government bailout funds so far.
The government has the option of working out an intercreditor agreement outside of bankruptcy that would give it rights to some collateral ahead of other creditors. Such agreements, often made when money is lent to a company that already has liens on most of its assets, are usually negotiated when the loan is made.
U.S. Law Firm
Cadwalader, Wickersham & Taft LLP is advising the government on how to make sure it gets paid back first, including by way of intercreditor agreements, the people involved with the talks said. Hired last month, the law firm is working for the government with Sonnenschein, Nath & Rosenthal, a Chicago-based firm with capital-markets experience, and Rothschild Inc., an investment bank, the people said.
The issues are "extremely complex," said Bruce Clark, a credit analyst at Moody's Investors Service.
The existing loan agreements appear to give the banks a superior position to the government, Clark said.
"However, at the end of the day, the ultimate position of the government could end up being determined by whatever concessions various creditors make, and the determination of a bankruptcy court if it ever gets there," he said.
When the automakers were lobbying the government for assistance, lawmakers made a point of saying that the government must be assured that if the companies failed, taxpayers wouldn't lose the investment.
Existing Lenders
Workman said the U.S. couldn't force its loans to supersede existing secured lenders, so it built in a measure that allowed the debt to be converted to debtor-in-possession financing.
"A carrot and stick approach is spot on," he said.
As it stands, the government loans fall below existing debt secured by most assets for Auburn Hills, Michigan-based Chrysler and Detroit-based GM. Prior lenders have first position on some assets. The government has first position on assets not already pledged.
Chrysler has $7 billion in loans from a group of banks, including New York-based JPMorgan, Goldman Sachs and Citigroup. It also has $2 billion in loans from owners Cerberus Capital Management LP and Daimler AG. Cerberus owns 80.1 percent of Chrysler. Daimler owns the remainder.
GM has $6 billion in loans secured by assets from lenders including JPMorgan and Citigroup. JPMorgan spokesman Brian Marchiony, Goldman Sachs spokesman Michael Duvally and Citigroup spokeswoman Danielle Romero-Absilos declined to comment.
Lori McTavish, a spokeswoman for Chrysler, declined to comment beyond confirming the primacy of the bank loans. GM spokeswoman Renee Rashid-Merem and Treasury spokesman Isaac Baker declined to comment.
Unless the automakers show by March 31 that they will be able to return to profit and repay the money, the government can demand return of the loans.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ad_m06A_gtLk&refer=home
GM, Chrysler May Be Put Into Bankruptcy to Protect U.S. Loans
Feb. 9 (Bloomberg) -- General Motors Corp. and Chrysler LLC may have to be forced into bankruptcy by the U.S. government to assure repayment of $17.4 billion in federal bailout loans, a course of action the automakers claim would destroy them.
U.S. taxpayers currently take a backseat to prior creditors, including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to loan agreements posted on the U.S. Treasury's Web site. The government has hired a law firm to help establish its place at the front of the line for repayment, two people involved in the work said last week.
If federal officials fail to get a consensual agreement to change their place in line for repayment, they have the option to force the companies into bankruptcy as a condition of more bailout aid. The government would finance the bankruptcy with a so-called "debtor in possession" or DIP loan, a lender status that gives the U.S. priority over other creditors, said Don Workman, a partner at Baker & Hostetler LLP.
"They are negotiating to see if they can reach an agreement," said Workman, a bankruptcy lawyer based in Washington. "If not, they are saying ‘We are pretty darn sure that a bankruptcy judge will allow us'" to be first in line for repayment.
Both automakers have dismissed calls to reorganize under bankruptcy protection, saying a Chapter 11 restructuring would scare away buyers and lead to liquidation. GM and Chrysler are working toward a Feb. 17 deadline to show progress on a plan put in place as part of the U.S. loans received in December from the Troubled Asset Relief Program. They must reduce labor costs and show how they will repay the money by next month.
Out of Court
GM and Chrysler are already trying to restructure out of court, cutting labor costs, reducing debt levels and eliminating dealers. GM is in talks to pare $27.5 billion in unsecured debt to about $9.2 billion in a swap for equity.
The company said it plans to shut dealers and reduce obligations to a union retiree health fund by half to $10.2 billion in a separate equity swap. Chrysler Chief Executive Officer Robert Nardelli has said his company will also try to cut debt levels.
January sales from automakers plunged 55 percent at Chrysler, 49 percent at GM and 40 percent at Ford Motor Co.
Ford, the second-largest U.S. carmaker, has declined government bailout funds so far.
The government has the option of working out an intercreditor agreement outside of bankruptcy that would give it rights to some collateral ahead of other creditors. Such agreements, often made when money is lent to a company that already has liens on most of its assets, are usually negotiated when the loan is made.
U.S. Law Firm
Cadwalader, Wickersham & Taft LLP is advising the government on how to make sure it gets paid back first, including by way of intercreditor agreements, the people involved with the talks said. Hired last month, the law firm is working for the government with Sonnenschein, Nath & Rosenthal, a Chicago-based firm with capital-markets experience, and Rothschild Inc., an investment bank, the people said.
The issues are "extremely complex," said Bruce Clark, a credit analyst at Moody's Investors Service.
The existing loan agreements appear to give the banks a superior position to the government, Clark said.
"However, at the end of the day, the ultimate position of the government could end up being determined by whatever concessions various creditors make, and the determination of a bankruptcy court if it ever gets there," he said.
When the automakers were lobbying the government for assistance, lawmakers made a point of saying that the government must be assured that if the companies failed, taxpayers wouldn't lose the investment.
Existing Lenders
Workman said the U.S. couldn't force its loans to supersede existing secured lenders, so it built in a measure that allowed the debt to be converted to debtor-in-possession financing.
"A carrot and stick approach is spot on," he said.
As it stands, the government loans fall below existing debt secured by most assets for Auburn Hills, Michigan-based Chrysler and Detroit-based GM. Prior lenders have first position on some assets. The government has first position on assets not already pledged.
Chrysler has $7 billion in loans from a group of banks, including New York-based JPMorgan, Goldman Sachs and Citigroup. It also has $2 billion in loans from owners Cerberus Capital Management LP and Daimler AG. Cerberus owns 80.1 percent of Chrysler. Daimler owns the remainder.
GM has $6 billion in loans secured by assets from lenders including JPMorgan and Citigroup. JPMorgan spokesman Brian Marchiony, Goldman Sachs spokesman Michael Duvally and Citigroup spokeswoman Danielle Romero-Absilos declined to comment.
Lori McTavish, a spokeswoman for Chrysler, declined to comment beyond confirming the primacy of the bank loans. GM spokeswoman Renee Rashid-Merem and Treasury spokesman Isaac Baker declined to comment.
Unless the automakers show by March 31 that they will be able to return to profit and repay the money, the government can demand return of the loans.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ad_m06A_gtLk&refer=home
Treasury Secretary to Unveil Private-Sector Partnership to Buy Troubled Assets
Treasury Secretary Timothy Geithner is expected to announce that the government will become a partner with the private sector to purchase banks' troubled assets, according to people familiar with the matter.
The plan for a so-called aggregator bank, a variation on a theme that Obama administration officials have wrestled with for weeks, is among four main components of Mr. Geithner's bailout revamp, which he is expected to announce Tuesday.
ALL THE DETAILS: http://online.wsj.com/article/SB123404707960860295.html
Treasury Secretary to Unveil Private-Sector Partnership to Buy Troubled Assets
Treasury Secretary Timothy Geithner is expected to announce that the government will become a partner with the private sector to purchase banks' troubled assets, according to people familiar with the matter.
The plan for a so-called aggregator bank, a variation on a theme that Obama administration officials have wrestled with for weeks, is among four main components of Mr. Geithner's bailout revamp, which he is expected to announce Tuesday.
ALL THE DETAILS: http://online.wsj.com/article/SB123404707960860295.html
GTCB has been in the news all weekend and it will get at minimum a $.10 to $.20 boost on Monday morning. Lots of excitement after the FDA approval.
The U.S. economy is in an intensifying inflationary recession that eventually will evolve into a hyperinflationary great depression. Hyperinflation could be experienced as early as 2010, if not before, and likely no more than a decade down the road. The U.S. government and Federal Reserve already have committed the system to this course through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, and gross mismanagement.
The U.S. has no way of avoiding a financial Armageddon. Bankrupt sovereign states most commonly use the currency printing press as a solution to not having enough money to cover their obligations. The alternative would be for the U.S. to renege on its existing debt and obligations, a solution for modern sovereign states rarely seen outside of governments overthrown in revolution, and a solution with no happier ending than simply printing the needed money. With the creation of massive amounts of new fiat (not backed by gold) dollars will come the eventual complete collapse of the value of the U.S. dollar and related dollar-denominated paper assets.
What lies ahead will be extremely difficult and unhappy times for many. Ralph T. Foster, in his "Fiat Paper Money" (see recommended further reading at the end of this issue), closes his book's preface with a particularly poignant quote from a 1993 interview of Friedrich Kessler, a law professor at Harvard and University of California Berkeley, who experienced the Weimar Republic hyperinflation:
"It was horrible. Horrible! Like lightning it struck. No one was prepared. You cannot imagine the rapidity with which the whole thing happened. The shelves in the grocery stores were empty. You could buy nothing with your paper money."
This Special Report updates and expands upon the three-part Hyperinflation Series that began with the December 2006 SGS Newsletter, exploring: (1) the causes and background of the evolving hyperinflation and great depression; (2) why circumstances will differ from the deflationary Great Depression of the 1930s; (3) implications for politics and the financial markets; (4) considerations for individuals and businesses.
The broad outlook has not changed during the last year. More generally, though, developments in the economy and the financial markets have been in line with projections and have tended to confirm the unfolding disaster. Specifically, the current inflationary recession has gained much broader recognition, while the still-unfolding banking solvency crisis has confirmed the Fed's and the U.S. government's willingness to spend whatever money they have to create in order to keep the financial system from imploding. While the dollar has taken a heavy hit -- down roughly 20% against key currencies from last year -- selling of the U.S. currency still has been far short of the outright dollar dumping that eventually will lead to flight to safety outside of the U.S. dollar. That event is important to the shorter-term timing of the pending hyperinflation.
http://www.shadowstats.com/article/292.pdf
Anyone else see the stock price trickling back up on Monday given all the postive news and coverage that GTCB has gotten over the weekend?
You may be right. I for one will be watching closely to see if we breakout of the current trading trend and feel that is a high possibility with all the good news related to the sector which has begun to trickle in.
BAC chart-- What we are up against